PSC faults CenHud acquisition

POUGHKEEPSIE — Central Hudson Gas & Electric Corp. has less than two weeks to respond to the state's scathing critique of its proposed acquisition by Canadian company Fortis.

Jessica DiNapoli

POUGHKEEPSIE — Central Hudson Gas & Electric Corp. has less than two weeks to respond to the state's scathing critique of its proposed acquisition by Canadian company Fortis.

The billion-dollar deal does not provide nearly enough benefit to Central Hudson's customers and should be denied unless changes are made, according to financial analysts and economists working for the New York State Public Service Commission.

Fortis has proposed $20 million in customer benefits, but the PSC staff wants to see that figure more than quadrupled to $85 million, according to a transcript from a hearing in Albany published this month.

Central Hudson spokesman John Maserjian declined to comment on the specifics in the testimony, saying the company still expects the PSC to approve the deal in the first quarter of next year.

Central Hudson has until Nov. 27 to respond to the testimony.

Fortis' proposal of $20 million in benefits comes from savings in insurance and publicly traded company filing costs, a customer rate freeze extended through 2014 and a $5 million fund for customer and community outreach programs.

The PSC staff arrived at their figure using a ratio comparing benefits offered to customers against the utility company's delivery revenues.

When Spanish company Iberdrola acquired New York State Electric and Gas and Rochester Gas & Electric, the dollar figure of the benefits it provided represented almost 22 percent of the local utilities' revenues from power deliveries, according to the testimony. In the Central Hudson-Fortis deal, that figure is only about 6 percent.

Using the ratio of benefits-to-revenue alone, Fortis should provide $75 million in benefits to Central Hudson customers.

But, PSC staff say there are other factors upping what the company should bring to the table.

Unlike Iberdrola, which has a presence in 37 countries, Fortis' operations are mainly in Canada. The larger, older Spanish company can better weather financial difficulty than can Fortis, according to the testimony.

PSC staff recommend that the bulk of the savings Fortis presents to Central Hudson customers should come from writing off deferred expenses stemming from Hurricane Irene and Tropical Storm Lee, for which ratepayers would otherwise foot the bill. Benefits should also go toward low-income economic development and energy efficiency interests, and expanding Central Hudson's natural-gas conversion program.

The rate freeze originally proposed provides no benefit to customers, according to PSC staff. The company has been deferring amounts it's owed by customers, and they would likely face significant rate increases in coming years.